{"id":15521,"date":"2025-06-28T19:42:02","date_gmt":"2025-06-28T23:42:02","guid":{"rendered":"https:\/\/intramuralist.com\/?p=15521"},"modified":"2025-06-28T19:42:02","modified_gmt":"2025-06-28T23:42:02","slug":"a-meaningless-metric","status":"publish","type":"post","link":"https:\/\/intramuralist.com\/?p=15521","title":{"rendered":"a meaningless metric"},"content":{"rendered":"\n

[Welcome to our annual Guest Writer Series, a time in which we are intentional in listening to other voices. Know that AR may\/may not agree with the perspective expressed. Know, too, that agreement is secondary to learning from others. Meet Guest Writer #2!]<\/em><\/p>\n\n\n\n

* * * * *<\/p>\n\n\n\n

Performance measurement is ubiquitous in the business world.  Companies understand that if an objective is quantified, monitored, and made visible, the objective is more likely to be accomplished, especially if incentives are tied to the metric.  Obviously, it is vital that the metric being incentivized is aligned with the desired objective.<\/p>\n\n\n\n

The current thinking of some of our nation\u2019s leaders is to focus on our trade deficit as an indicator of how well our economy is doing.  The term sounds scary.  It suggests that bad activity outweighs the good, so it is urgent that we fix it!  In reality, the trade deficit is a meaningless metric.<\/p>\n\n\n\n

If a country exports more than it imports (in terms of whatever currency it uses), it is said to have a trade surplus.  If imports exceed exports, it has a trade deficit.  This terminology implies that net exporting is always and everywhere a positive.  That is simply not the case.<\/p>\n\n\n\n

The United States has a trade deficit because we import more than we export.  In fact, we have the largest trade deficit in the world by far.  Do you know why we can afford to buy so much more than we sell?  BECAUSE WE ARE THE RICHEST COUNTRY ON EARTH!!  That\u2019s why!  We would not want to trade places with anyone else.<\/p>\n\n\n\n

Companies in other countries give us their goods and we give them dollars, which they can use to buy other items.  American companies sell products to those in other counties and in return receive dollars or foreign currency.  It is because we are so wealthy that we can import so much more than we export.<\/p>\n\n\n\n

China has the largest trade surplus in the world.  China also has a much higher percentage of its population who are peasants.  Would you rather live in China or the USA?  That\u2019s what I thought.<\/p>\n\n\n\n

Let me try another approach\u2026imagine there are three neighboring countries:  Agritopia, Industriland, and Servicestan.  The GDP (gross domestic product) of each country is $3 million.  In other words, their economies are exactly the same size.<\/p>\n\n\n\n

Agritopia grows corn, wheat, and other farm products.  They sell $1 million worth of food to Industriland, $1 million to Servicestan, and consume $1 million themselves.<\/p>\n\n\n\n

Industriland produces all sorts of manufactured goods.  $2 million of it is sold to Servicestan and $1 million is used domestically.<\/p>\n\n\n\n

Servicestan does not make any goods, but they do excel at personal services.  Their citizens cut each other\u2019s hair, give manicures, and treat skin to constitute a $3 million economy.  (They are much better groomed than their neighbors.)  Servicestan has no exports.<\/p>\n\n\n\n

So, let\u2019s calculate the trade balance for each county:<\/p>\n\n\n\n